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If you are behind on your mortgage payments

Tighten expenses.

ARM’ed?
You’d better be ready

As prices rose, many people did whatever they could to get into a home. To qualify and to keep early payments low, more than 20% of recent buyers took an Adjustable Rate Mortgage (ARM).

But with interest rates rising, an ARM can cause big trouble. Many people who took Adjustable Rate Mortgages over the last few years can no longer make the payments. Some of those loans wind up in foreclosure.

Most ARMs are subprime loans. Interest rates for subprime loans are higher than the best available rates. The Center for Responsible Lending, a nonprofit research organization, recently reported that the risk of foreclosure is larger for people with subprime loans. Their research showed:

  • 2.2 million recent subprime home loans have already failed or will end in foreclosure. This will cost homeowners up to $164 billion.
  • One of five (19.4%) subprime mortgages opened in the past two years will end in foreclosure.
  • The resulting loss of equity will hurt many Latino and African American homeowners. These communities get a disproportionate share of subprime home loans.

 

 

 

 

 

 

TIGHTEN EXPENSES: The first thing to do is review your finances. Make a budget; go over every dollar you spend in a month. Identify expenses on things you don’t need and then cut them out.

Priorities should include:

  • Your home
  • Food
  • Utilities

Other debts, while important, may have to be eliminated or reduced. These include:

  • Cable TV
  • Dining out
  • Some telephone services
  • Expensive cars (and their high insurance costs)

GO BIGGER: If cost-cutting is not enough, you may need to make even harder choices. Some things to consider are:

  • Refinancing the home
  • Selling the home
  • Renting out the home and moving to a less expensive apartment
  • Even filing for bankruptcy

WHAT YOU CAN DO:

  • Talk to your lender – If the problem is temporary, the bank may be willing to reduce or suspend payments and add them to the loan amount. They may be willing to allow you time to make up any missed payments. They may even be willing to change the terms of your loan. Refinancing to lower your payments is a good option if the house if worth more than you owe. Selling your home is a good option if you owe more than it’s worth.
  • Talk to an accountant, an attorney, or a debt counselor as soon as possible – Refinancing or selling your home could come with penalties. Check with knowledgeable people before you act. The U.S. Department of Housing and Urban Development (HUD) has a list of approved counselors. They can be found on their website or by calling (800) 569-4287.

WE CAN HELP: Our counselors are available to answer your questions. To contact a DCA real estate representative, call (800) 973-3370.

PAY ON TIME: If you miss even one payment, your lender may file a Notice of Default, which begins the foreclosure process.

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